Heartland Group Holdings (NZSE:HGH) Will Pay A Smaller Dividend Than Last Year

Heartland Group Holdings Limited's (NZSE:HGH) dividend is being reduced from last year's payment covering the same period to NZ$0.0235 on the 21st of March. The dividend yield will be in the average range for the industry at 4.7%.

Check out our latest analysis for Heartland Group Holdings

Heartland Group Holdings' Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Heartland Group Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign for the sustainability of its dividends, as it may mean that Heartland Group Holdingsis pulling cash from elsewhere to keep its shareholders happy.

Looking forward, EPS is forecast to rise by 167.1% over the next 3 years. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 59% over the same time period, which would make us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was NZ$0.07, compared to the most recent full-year payment of NZ$0.04. This works out to be a decline of approximately 5.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Heartland Group Holdings' EPS has fallen by approximately 21% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We should note that Heartland Group Holdings has issued stock equal to 31% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Heartland Group Holdings' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Heartland Group Holdings you should be aware of, and 1 of them is a bit unpleasant. Is Heartland Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.